Sunday, March 30, 2008

Cry havoc

Painted into a corner over the gasoline tax issue, Prime Minister Fukuda attempted to undercut Ozawa Ichiro in an interview on NHK Sunday, suggesting that the impetus for a grand coalition came from Mr. Ozawa. The facts of the negotiations surrounding an LDP-DPJ grand coalition — especially Watanabe Tsuneo's role in it — may never be known, but the significance of Mr. Fukuda's mentioning this now has everything to do with undermining Mr. Ozawa's position at the head of the party.

The grand coalition fiasco, after all, was the end of the DPJ's love affair with Mr. Ozawa, insofar as it was a love affair. Recalling the fiasco can only undercut Mr. Ozawa's relationship with his own party.

But Mr. Fukuda must be encouraged by the results of an Asahi poll that shows that the public is favorable towards his latest compromise solution to the gasoline tax dispute. In a phone survey of approximately 650 respondents from across Japan, 58% approved of delaying the transfer of the road construction fund into the general fund until fiscal 2009, while only 24% opposed. At the same time — and more than slightly contradictorily — only 31% approve of the plan to retain to the temporary gasoline tax and use the revenue for road construction in fiscal 2008 (55% opposed). Respondents were pleased at the prospect of a drop in gasoline tax in April by a margin of 72% to 12%, but that did not translate into more support for the DPJ. Asked whether they approve of the DPJ's position, 40% approved, 44% disapproved. Less significantly, the DPJ saw a one-point drop in its support rate to 20%, compared with the LDP's two-point increase to 31%. The LDP, however, should not be too encouraged by this poll: respondents overwhelmingly blamed both parties for the gasoline tax dispute, and when asked about the BOJ dispute, respondents approved of neither the LDP's nor the DPJ's approach to the succession battle.

There is now the open question of whether Mr. Fukuda truly has the support of the LDP in pushing for a compromise that includes provisions for the demise of the special road construction fund, whatever the time line. The opposition parties consulted with Chief Cabinet Secretary Machimura on Friday on this question, who replied, "I think that individual members hold various opinions, but I think that since it is the prime minister's decision and leadership, understanding will be reached." Mr. Fukuda indicated Friday in response to a question in the HC Budget Committee that he consulted beforehand with the ministers of finance, transportation, and internal affairs, but not with the whole cabinet.

Hence Kono Taro felt compelled to describe Thursday's about-face as a "palace coup," with Mr. Kono and his comrades, who believe in the need to transfer special road construction funds into the general fund and are prepared to vote against the prevailing measure if it comes before the HR a second time, "transformed in a stroke from opposition forces to imperial guards" as Mr. Fukuda wholly embraced their ideas.

The idea that road tribe and its allies in prefectural and local governments will be cowed by Mr. Fukuda's sudden shift is unrealistic. Confident that they had won the argument — convinced that the government, having passed the bill, would simply wait for sixty days to elapse and then pass the bill again — there is no reason to think that the advocates of business as usual will be silenced. As Mr. Kono wrote, "Within the party there are still various voices. Whether or not the LDP will completely cut longstanding ties of obligation, whether or not it can do the ordinary things — there will not be a second chance."

The just-passed compromise bill that extends to the end of May various taxes in the special measures bill on taxation except the temporary tax means that the price of a liter of gasoline is set to drop from Tuesday. It also means that both Mr. Fukuda and Mr. Ozawa will now be under tremendous pressure that will grow by the day. Mr. Fukuda will be pressured by the reformists to hold the new line, even as the road tribe and its allies pressure Mr. Fukuda to back down from his newly announced plan. The prime minister will also face some pressure from the DPJ, which has promised once again to pass a non-binding censure motion against the prime minister if the HR re-passes the tax bill at the end of the sixty-day period. (Mind you, I don't take this threat particularly seriously — and I'm sure neither does Mr. Fukuda — because the prime minister is free to ignore the censure motion and carry on as if nothing happened. But it's worth mentioning...)

Mr. Ozawa, meanwhile, will be under pressure from opponents within his own party not to cave, lest his position as party leader become forfeit, just as the DPJ as a whole will be under pressure from the media (AKA "public opinion) and the government to compromise. Every day that passes will help the DPJ, as consumers become accustomed to paying less for gas and less willing to countenance a tax hike (and worried LDP backbenchers less willing to risk their seats to see the higher rate restored in a month's time).

The newly passed agreement may momentarily ease the sense of crisis, but not for long. The LDP and the DPJ are in the midst of a battle with significant consequences for the future of the Japanese political system.